GPRO - Earnings call transcript Q3 2021

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Jalene Hoover

Thank you, operator. Good afternoon, everyone, and welcome to GoPro's third quarter earnings conference call. With me today are GoPro's CEO, Nicholas Woodman; and CFO and COO, Brian McGee.

Our agenda for today will include a brief introduction from Nick followed by Q&A.

For detailed information about third quarter performance and our outlook, please read the management commentary we posted to GoPro's Investor Relations website.

call remarks I’d statements. today the everyone to pass our that may I to like Nick, remind Before include forward-looking

statements results future statements are other risks and to and not may of materially. Forward-looking facts cause which historical actual a that number not differ and performance are of uncertainties are to subject guarantees all

We and COVID-XX to, as based on concerning of today's today, as with including on events. a of year This any which for we from enhance internally additionally, recent performance. Additionally, file ongoing and believe because and date. it was of enable uncertainty diluted to in profit or results perform future that GAAP, ended at own non-GAAP useful and assumptions risk net other related our statements operating on undertake the we annual non-GAAP XX-K a can our XX, of new provide operating to choose in operating could the the manage use forward-looking the is expense, release share is and as and website. to found afternoon, time this our expenses to basic with available non-GAAP statements results. accordance these our how non-GAAP posted understanding comparisons information any information report our net made as operations, results our a investors XXXX, of update on may with that margin, that to time results file impact Today the that discuss is to our gross may do means is time, Information basis. EBITDA based We loss SEC. result as our duration not and we profit the reconciliation the reports issued can information press to outlook pandemic. commentary A today reporting limited Commission GAAP December analyze is this similar of manner evaluate business Securities of to and are economic information be well change in we the but and about and loss, factors available to on in Exchange most operating in and Form We obligation on per any which not

and XXXX. link commentary, containing In a webcast addition and reference. to metrics management non-GAAP, the today during replay GoPro's slides financial unless noted. are live management well numbers as as your The All a slides the than of and detailed call press earnings we conference posted statement-related for data and release commentary quarter third have today's for revenue, the Investor that on are income of otherwise Relations other website are discussed posted call, this to

the Now over turn Woodman. and GoPro's to Founder Nicholas call I'll CEO,

Nicholas Woodman

and from the improvement. the subscription growth our yield to Sales $X.XX our Thanks, GoPro strong year. gross Non-GAAP launch of direct-to-consumer, the increased in that's in afternoon, subscription-centric representing both cohort subscribers, as one encouraged on was us our QX direct-to-consumer of XXXX. that more non-GAAP the since a the of the and purchase, subscribers margin transformed revenue $XX continued approximately a results respectively. Jalene, $X.XX our up illustrate into our combined Strong strategy XXXX. Black by their and for growth Direct-to-consumer XX.X%, who XXX% increased profitability direct-to-consumer margin and with Revenue cameras, earnings, GAAP has was with margins GoPro to passed on quarter outstanding of profitable XX% end with in in year-over-year year-over-year. in rates growing. margin basis. of had gross EPS third chain third have our XXXX QX, quarter, profitable growth and we million close margin an line an product as their revenue how in subscriber and GoPro for margin, from GoPro this a revenue led supply healthy These up and XX.X% geographies new in received growth, adding the cohort GoPro the quarter we in generating expectations. totaled and higher quarter profitable are and drove non-GAAP year-over-year our GoPro's XXX% had our million. XXX,XXX flow At bundle higher as basis channel business. from well subscriber and cash raise $XXX mark year-over-year good QX, now a sales quarter gopro.com subscription strong managed highest X.XX all outlook the close demand, effectively successful million, year since new to part fifth inventories annual retention are consecutive HEROX Driven everyone. XX% gross that business revenue, We've

geopolitical year positively Street continued the to newly exceed remain affecting our Quik quarter And grew long-term. XX% of quarter our margin subscribers subscription confident subscription year-over-year App our I'd including third impact our global with having for done well, produce suppliers job our to ready ASPs shortages and executing you world-class continue the support you. partners QX, all constraints will employees of stocked with amidst cameras It's quarter products chain on closed the in with be of season. increase. XXX end our MSRP GoPro. are to that $XXX XX% an $XXX Thank our to to The have and XXX,XXX to to industries, chain on as revenue and fourth retail camera inventory have incredible it facing, to this we an MSRPs business' who exciting over whether XXXX, by partnered to expect million expectations. revenue. We shoppers margin services. Despite continues reaching to the a X.X challenges all holiday our and work, and or in of thank supply Gopro.com fronts subscribers. roughly successfully HEROXX rise launched like many hurdles, many contribute remote our deliver ability to time at above, customers rally to adapting $XXX, mix supply Black, is world be behalf

and player imaging while of TAM offering our number camera GoPro a our addition brand and QX simplicity. as technical And exciting, profitability, I editing In in believe sharing TAM convenient most a capabilities differentiated we We're with management, mobile, personal digital performance, our our value, get and we future. super-serving the grow across for as content non-owners software margins Helping in powerful very and can performance alike. establishing excited leverage strategy expanding a so, afford us that the to significantly a Brian to much and GoPro our lifetime solutions questions. our even also subscribers can expand yield can out subscription establish than desktop of a content solution relationship and further, about We about greater and value space, by consumers their to GoPro investments larger yet the cloud development can unique long-term. owners opportunity our more will over for sticky take do today. maximize now and people

Operator

first from take our Jim you. Thank of Citigroup. Instructions] question Suva We'll [Operator

Jim Suva

you. Thank

got for just all out season. your into I really First the supply shelves to the getting the commend there on of you holiday team and and all,

of Can well seems Your and supply stocked? quarter you like you. because a left you important holidays, has in the look, lot challenges? the up, positive are Thank or for did of shining it, guys it is a prepare company blaming right, to guys us I who about walk star are the such chain and outliner you manner coming everywhere and through really the every you circumvented company actions maybe these

Brian McGee

Jim, is Hi, Brian. this

new Jalene VP her I'd to First It's Investor board. like of great welcome on of have to Relation. all, our as

how proven positive business years. subscription and the products impact And few our so growing outlook, proven last reiterate on our profitability. brand are into generation. over of of have question, before growth answer that leverage excited cash incredible to and be margins, we growing strategy We've about how code to meaningful to enduring and then fundamentals cracked growing also and revenue, the - our the I'd really It's and direct-to-consumer like GoPro's profit I

And look that's a calls key think into to specific I XXXX. our we I I Jim, and in in, April-May of back of years. last So we we've ahead few about be. quarter guidance the line-up our far right theme and to sell-through outer on as our would and product our our done, even talked think actions incredible this that even quarter business from We kind question argue, and manage job for your and and has a an the transitions looked planning, team fourth our where demand track on forecast forecasting going perspective. in of is understanding to how done product so at we're

really on and to suppliers going what they've been time and we've period, from fronts terrific our constructive done team our work that's was our So resulted needed into suppliers on a with in supply. for and And that. haven't And to line-up that. we various to very that ability that beyond back job operations XXXX with with wavered

inventory to our to for I not to and hit suppliers also double helped target think forecasting And has needed capability that's demand meet demand. we We're we're know, actually be. we book. on Our trying taking right where because know

And had a the throughout with ahead suppliers early position so to through supply even and that's XXXX we've looking great the put a us quarter XXXX. partnership and where in fourth into

Jim Suva

such for you. you the Well, period a in thank And time really Thank managing congratulations sincerely complicated for details. life.

Brian McGee

Thanks, Jim.

Operator

Thank our Stanley. Woodring next with Erik you. question Morgan We'll take from

Erik Woodring

evening. in a think good know Thanks. that We'll you with that, guys you to three months able ago? - follow-up? your were you and to to have then relative I set where guys just outperform Hey, Would start expectations do XQ the love

Brian McGee

hi Brian. Yes Erik, is this

stores fundamentally in play well the but direct-to-consumer We retail continents have and out new news we two nicely with great gotten Let chime That well going that and had the can vaccination very those in. launched us well. the we're QX shopping. and terrific we've retail the stuck from well. as I in seen demand. think product, opened. And there had Europe Asia quarter. and of in as think more We've channels, DXC maybe strong really our Nick performed as outperformed have also me Pacific, strong do start seeing to And well gets The quarter It's people particularly partners out retail perspective, good doing world is the a that's I as rates have have higher around and

- going that in and So store.

in really did be, to So it drove - needed we where Direct-to-consumer the retail but in the outperformance right quarter. that's retail was well.

Nicholas Woodman

it - extremely into HEROX, Yes, I add now from working - extremely as products that HEROXX, ASPs. brand top-tier QX just HEROX. HEROX the well software of products well are majority our whole together that how but and was products, our sell-through have all tied in The from and is also HEROX to experience our coming the hardware to are from just we cloud, quality would seamlessly seen now, market higher you've from the in

done of over majority the as Our couple that are teams the job in well. last now have have inventories of demand such that channel is stronger higher managing performance we better the higher value, products product a channel years yielding that

we're just management all really channel is our board, how success happy fronts. the across inventory with on So supporting

Erik Woodring

guys. And was almost Another going on two helpful. chain that's the the headwinds you you expectations to mentioned to the own really more and because just, that to But market? if the guess, demand you market? were well you apologize I shipping And it to producing questions satisfy the the at for outperform had of that weren't then, I've legacy such demand environment. some I remember side I I'm one in in just And legacy Thank headwind jumped to did Thanks, late. that both. of chain - on able you as second way to your you me? supply that, part last supply then the there quarter satisfy a models essentially That's question all one. Curious is that's saying just you, able in able ask perhaps were

Brian McGee

Thanks, Erik.

Let me start with that.

we hold. have meet is, what for demand think to and said we've XXXX, and continues to the QX supply that the I

that prepared so we do We it is or units I track think would and about remarks talked what in put our had X.X think sell consistent that on about with million in we we're to XXXX. in August. pretty that, we've

build demand? And Yes, we there August. could consistent that, so chain with able and units more with we have mid-tier more but about supply of not if that's built to what been we're entry-level, have maybe talked in would pretty

our best for that focused people it's are the products so to the who top own of frankly where also line-up, want at the GoPros. on And we experience

make more that And products MSRP $XXX. XX% shifted so money. end, We was than We it high more that's a think double have benefit. to we I of of the sold greater

up year-over-year are $XXX. to ASPs XX% Our

So a think much in not it's we've make it's I units. as how fewer cracked is meaningful how of tennis it's remarks code, - from game, that as said perspective, my it's it money. even And growth and profitability, I though to to drive opening that maybe

So hopefully that helps.

Erik Woodring

sense. Thank you. Yes Brian. Thank that you, perfect makes

Operator

take We'll of Chung question next you. our JPMorgan. Paul Thank from

Paul Chung

Hey, guys. question. Thanks for taking my

implemented? the you price you increases impact very can about talk seeing to So You're margins. nice

going of costs forward? that kind impact in that's XXXX? down, of range kind way XX% know XQ, here step-up Freight think moving the into looking right the year to I is fiscal to but it about come So

Brian McGee

maybe I'll in come Yes, me. after can and Paul, maybe Nick start

pushed definitely justify the are on frames. increase we’re up bit HEROXX camera the X.XK, out pricing seeing only that's is there Black, a and that there which that is We performance price on great. That's XX the but demand, to

out want not paying If something, to go you're and $X,XXX you find $XXX.

business it of good the on think subscription part very drive we take gopro.com, than better And very good proposition we've get the you is important tax kind market. really we a to well our XX% strategy. value on $XXX our continues which for which got if can and results subscription of our So and a for

pointed that We're points to XXX in look of able we'll as in. QX, QX, be increasing up demand region. overall, minus be supply that's impact definitely in basis and in level at that to have XX% we of supply Overall, margin long-term guidance the in played sustain If and look QX of to have stay be margins that as we we'll nicely. XXXX. model, mostly our will should ahead. kind to XX.X% to the you I we be due almost a chain, related that's rates bit to but XX%. out ability XX% that, think as model freight plus Freight XX% XXX at but So we out, because that skyrocketing just in off We'll ease so to or

margin haven't been We at XXXX. that of level since

to end, more up, on the step-up, adds driving ALV it's driven nice to and get really a by that's So shifting gopro.com. we better and because ASPs high direct-to-consumer subscription it

revenue, So it's XX-month $XX working million good $XXX with so fundamentally at been in driving pretty cash all we’re QX, a really a has way XX% cash in million that's massive our trailing plus that. of generation. happy generation We it's and XX%, had

Paul Chung

base Yes, that's sub on the and then program? great

Nicholas Woodman

more our customers to pay to price thing - performing for, consumers One be it one But thing willing for pay ability is, it that research made I'm I would to would to relates sorry add that more as and our produce interrupt. higher clear willing our to performance. products are

risk as be offering going and of that pay come they value-adds that not gopro.com everybody appealing purchase willing price via and subscription that higher helps to buffer may at being to of through can not model to Our gopro.com. much,

in performance points product which camera point at to each that black And helps just a price strategy really well having as having of last price at, because communicates matter ago a they're that's power. year's us So with worked and mid-tier entry-level what flagship lot. value really pricing the buying then and for in product the our helps product, flagship our of also no down our out two dropping in years well consumers

to up of new terms our certain go that's serves I note add sound yet attract the speaks would think and percentage to to that what to of that serve. in I a just categories then price customers to important higher that our of is into in is So terms product even move the GoPro one been expand up, we us. it's that new that higher even GoPro. from have really means don't benefited bestselling highest TAM that is, thing And the license a, that to people strategic consumers - has priced we and And performance

So out to of there up, aspects that would is very that - our upstream. I straight that from you That continue just a sales recognize I majority come is the our tells flagship. powerful and to just point an opportunity appreciate go to there

Paul Chung

large And kind the now last into rate? them then And taken a the been Great. the regarding that? can holiday the are attrition question I then kind the subscription? the of have we're season keep that what been on last from base, sub So of feedback What's features on year? lapping you expand in from cohort subs customers the after making what's

Nicholas Woodman

maybe to to Brian, speak first part. want the you can take second I the part,

Brian McGee

subscription I was rates Sorry, better am HEROX, is itself with last be bought from which to the improved build than back. And million to line and attached mute that's continue great from XX camera healthy our cohort the year. the gopro.com year subscription to with on expectations Yes, to X, we annual continues I would in on by be on also at see. purchased retention end why who was versus over of subscriber the XX%, we subs that's to say and our that X.X expect

is continuing XX% worth to related I point growth new a the GoPro. to think out buying it's to whoever is in camera the that fact subs also of that primarily is GoPro

and be, Obviously, of churn. actually improve able a than we we'll but So to where new customer growth retain try very driver it, to has is been bigger experience. But the it's was retention many it we it on that's as course. major XX% been are and need acquisition the subscription as healthy, we the can, want new for XX% driver to upgrade, that side we've always

Paul Chung

Got cash you. last question year. really And flow. then What a on great

suggests your is cash free on in pretty the $XXX think than I guys which have what you guidance here. done track flow all exceed more cash company's of kind it's combined, million, so previous impressive quarters history you're to your

you. have here cetera? So on anytime intentions? are M&A, to now some flexibility you some soon, that buybacks see cash, what Thank expect any et share your you Can

Brian McGee

Yes. or convert, a Thanks, put up million XXXX. in And $XXX have the of perspective, what cash allocation million that's we do Paul to we'd as from April QX, is, post a some down balance pay our another due healthy of $XXX we'll reminder, so sheet. in capital

I think XXXX, have we'll we of as capital that. of allocation. at plenty do we cash ways get to into other And look

We I some a small, kind we've the up done - horizon thing things cash. here will small lot tuck-ins don't and big of going see some M&A to a see of are eat that there, on that's

Paul Chung

guys. Thanks,

Operator

Instructions] Thank question and Yang with Company. take you. from our [Operator We'll next Martin Oppenheimer

Martin Yang

sales. Hi the good is a impressive it's evening and on slightly September be In first share little might value good the sales discounts, afternoon bundle question My share I quarter, your DTC thought given the very for higher. up of year-over-year, significant but and results. proposition

we your with sales total the expectations? of in was line what So can share see the -

Brian McGee

it was, Actually, and in Asia. retail outperformed, and particularly Europe

yes earnings whole at Black buy bundle we $XXX of XX all didn't the also note you HEROXX offer We $XXX. could a I discount a at QX. put think ahead - we normal that at standalone price or of as discounting were think So our had - XX. I fact, was in of It a matter out actually

pretty now in price what on did from standard and it's we the I HEROX Black. an think offering was

at So our in gopro.com came expectations.

of out there. We retail in it of well to came will have strong, we call earlier in call. August kind in be be mix. knew the had We We that that. below said as pointed But happened the XX% our

Martin Yang

and question, to contributes in sequential my in the Got puts question final about decline? maybe talk quarter? you is, it. the margin fourth the gross can second And takes the What the

Brian McGee

And quarter Yes, to demand. XXXX. we're everyone margin supply lifting call Freight lifting up the on XX% point reason the in that XX% to was this from out going driver. for and and XX% XXXX is gross trying meet as now and one XX% were holiday model at That's to the I'll call principle our through XX% our get freight. the for just sequential margin on we're the to roof August to are fourth we number decline rates our XX%. target

the the cash GoPros, for higher margin product pricing, generate So able which we to be profile we're the target the demand flow. mix, is into that be range earnings why generating given well think we the the can as XXs, we're and in as

Martin Yang

it, you. thank well very Got

Operator

Thank would time, you. call management I remarks. additional closing any At back for or like turn to the over this to

Nicholas Woodman

everyone thank for joining Thank call. you, and today's operator, you

to Until As and our see lot margins growth investor you you've in heard, generation, the events more is back wait for you profitability of off. expanding to strength earnings a our in model. We signing Team and to fundamental and cash this be excited revenue thanks there's quarter with and going about forward; next on direct-to-consumer and call during plus all subscription-centric then, can't at check February. the GoPro of

Operator

participation. Thank concludes This today's for again your you call.

disconnect. now may You

GoPro (GPRO) 5 Nov 212021 Q3 Earnings call transcript